The Real Measure of American Prosperity: Retirement Security

Political commentators and the financial media are breathless over the latest economic numbers showing the lowest jobless rate in 49 years, but there is a big problem: These are quarterly, short-term numbers, and they do not indicate the financial health of the average American.

If they did have a direct impact, Americans would not be worried about their ability to retire. Instead, it is the opposite.

As numerous studies have shown, many Americans face a dismal retirement. About 50% of older Americans do not have anything in their retirement accounts. A Government Accounting Office report issued in March 2019 that found 48% of Americans over age 55 and older did not save anything in their employee sponsored or IRA accounts. Numerous other similar studies have found the same results over the past decades.

So, when federal agencies report positive statistics about the economy– whether they are about the jobless rate, productivity gains or wage increases–they fail to show the sharp disconnect between data that propels the stock market and the majority of Americans who have nothing to gain from these raw economic numbers.

Federal and state economic data take on a life of their own. They are widely touted by the financial media and make their way into political campaign speeches because they provide short-term political adrenaline. For the vast majority of Americans, the data creates a sugar high that lasts a few days and soon fades away.

The real measure of the average American’s financial condition is not data about jobless rates, changes in GDP or housing starts, but how well are they prepared for retirement.

But these periodic economic data dumps are a distraction. The financial media reports the numbers, but does not put them into context for the average American, many of whom essentially work from paycheck to paycheck. About 59 million Americans do not have three months of cash saved to meet an emergency, despite the recent positive jobless numbers, according to CNBC.

The real measure of the average American’s financial condition is not data about jobless rates, changes in GDP or housing starts, but how well are they prepared for retirement. After all, a person’s financial ability to retire with a comparable, but slightly lower, post-working living standard, represents their net accumulation of wealth over an entire working career. After all, the ability to retire with a modicum of financial security is part of the American Dream.

But retirement readiness studies show a different situation. Numerous retirement readiness studies all indicate a bleak future for millions of Americans. And while pundits gloat over the recent, positive economic numbers, they have no effect at all on the long-term ability of many Americans to save for retirement. For instance, a retirement report from the John Hancock annual Financial Stress Survey, found that “slightly more than three-quarters of survey respondents cited lack of retirement savings as a leading factor affecting their stress. Nearly half report they worry about it ‘a great deal,’ and only 40% expect to retire ‘about when planned.’”

This is the real mirror of how Americans gauge their financial situation, not periodic economic data dumps that fuel the stock market for a few days.

Fed Reserve Policies Against Average Americans

Retirement financial readiness is a marathon that requires a few basic things: wage growth over time; consistent savings, propelled by the miracle of compound interest devoid of excessive fees and expenses; debt management.

The government has a key role in managing all of this, especially in Federal Reserve Board policies, tax actions and job creation. But the Fed has often made decisions that are not based on the needs of average workers. Whether these are political or monetary is an ongoing debate, but the record shows the slant is against promoting wage gains for average workers.

Take the case of how the Fed acted against average Americans during the 14-year long period when Alan

Greenspan and wife, Andrea Mitchell

Greenspan served as Fed chairman (from 1987 to 2006.) Greenspan’s policies were shaped by the belief that any structure or regulation that impedes corporate profits, is detrimental to the economy. Regulation and taxes on the rich in any form fall under this umbrella. He also opposed the minimum wage, and regulatory agencies, such as the Food and Drug Administration, which hinder corporate operations.

However, Greenspan, a follower of Ayn Rand, advocated that practices, such as price collusion, would be permissible since they favorably change market conditions to favor participating corporations. Similarly, monopolies would be tolerated if they competed since they could maximize efficiency and minimize costs and prices. This helps explain why anti-trust laws have not been strictly enforced since 1981.

Greenspan also chose to enact Fed policies that largely kept inflation under control over the other choice of creating conditions that would increase wages. “Greenspan himself observed publicly on a number of occasions that the anxiety of American workers over losing their jobs was a critical factor in keeping wages down during most of the 1990s,” according to Jeff Faux is president of the Economic Policy Institute.

Building Retirement Wealth is a Marathon

It takes decades, often generations, for the average American to create enough wealth so it can generate a living monthly income. The lost decade of wealth erased from the 2008 recession, combined with the intentional decision to hold down wages during the Greenspan tenure at the Fed, are two main reasons why many Americans don’t have enough money to retire today. Gloating over “Trump’s stock market miracle” is slanted politically and immaterial to the vast majority of Americans, yet the media reports blindly reports the data with looking at its obvious mistake.

The real measure of American prosperity lies in the boring topic of how to be financially secure in retirement. This is one reason why retirement is rarely discussed in the media. It is depressing, boring and when done correctly, will show the flaws in the current unregulated capitalist system. All this would be bad for ratings, but it would be a great public service to a shaky democracy.

Chuck Epstein

Chuck Epstein has managed marketing communications and public relations departments for major global financial institutions and participated in the launch of industry-changing financial products. He also has written by-lined articles for over 50 publications, five books and served as editor and publisher of nation’s first newsletter on the topic of using the PC for personal investing and trading. (“Investing Online, 1994-1999). He also is a marketing consultant, writer and speaker on topics related to investor protection and opportunities in the very dynamic cannabis industry.

He has held senior-level marketing, PR and communications positions at the New York Futures Exchange, Chicago Mercantile Exchange, Lind-Waldock, Zacks Investment Research, Russell Investments and Principal Financial.

He has won national awards from the Mutual Fund Education Alliance (MFEA) and his web site, www.mutualfundreform.com, was named best small blog in 2009 by the Society of American Business Editors and Writers (SABEW).

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